The Department of Energy (DOE)—still in the middle of reforming the power industry—has moved to address a stumbling block in the implementation of a landmark policy meant to give consumers the option to choose their own supplier of electricity.
The agency has issued two draft department circulars, which could pave the way for the resumption of the implementation of the retail competition and open access (RCOA) scheme that was temporarily stopped by the Supreme Court (SC).
“One of the draft circulars tackles the demand side, while the other circular deals with the supply side, both clarifying some issues while waiting for a final decision from the SC,” Energy Undersecretary Felix William B. Fuentebella said in an interview.
The DOE solicited comments from industry stakeholders, who were given until October 10 to submit their comments.
“Once these circulars take effect, these will be embodied in a petition before the SC in a bid to lift the TRO,” Fuentebella added.
RCOA, in a nutshell, allows consumers to source power from a licensed retail electricity supplier (RES) to encourage competition in the generation and supply sector. At present, the majority of power consumers are being supplied by the Manila Electric Co. (Meralco), the country’s largest distribution utility (DU) firm.
The SC issued on February 21 a temporary restraining order (TRO) against a DOE circular and Energy Regulatory Commission (ERC) resolutions days before these were supposed to take effect.
The mandatory switching of consumers with an average peak consumption of 750 kilowatts to 999 kW, which should have taken effect on June 26, 2017, was among the rules that were halted by the SC.
But the mandatory switching of power users consuming an average of at least 1 megawatt (MW) per month is already in effect. Its implementation took effect on December 26, 2016, more than a month prior to the issuance of the TRO.
Various entities sought clarification on the effects of the TRO, specifically the participation of contestable customers in the RCOA and the issuance of licenses for RES.
“While the TRO remains in effect, what do we do?” asked Fuentebella. “We had to do something since many are asking for guidance. These two circulars address the voluntary aspect, allowing customers to choose whether they want to remain as captive customers or forge a contract with an RES.”
Voluntary
THE newly issued draft circular “Providing Policies on the Implementation of RCOA for Contestable Customers in the Philippines Electric Power Industry” is meant to implement RCOA on a voluntary basis instead of mandatory.
Section 1 of the draft circular calls for the voluntary participation of contestable customers with average peak demand of 750 kW and above for the past 12 months in the retail market.
Section 2, meanwhile, also calls for the voluntary participation of consumers with average peak demand of 500 kW to 749 kW in the retail market by June 2018, or an earlier date specified by the Energy Regulatory Commission (ERC).
Participation in the retail market shall require a retail-supply contract (RSC) between a contestable customer and RES, and registration of the RSC in the Wholesale Electricity Spot Market (WESM).
By December 2018, or an earlier date, electricity end-users within a contiguous area whose aggregate average peak demand is not less than 500 kW for the preceding 12-month period may aggregate their demand to be part of the contestable market and may voluntarily enter into RSC with aggregators.
Aggregators refer to any person or entity engaged in consolidating electric-power demand of end-users in the contestable market for the purpose of purchasing and reselling electricity on a group basis.
The draft circular states that the ERC will come up with the guidelines on the licensing of the RES and the retail aggregation. Also, the DOE and the ERC shall annually review and issue policies to achieve the full implementation of RCOA until it reaches the household demand level.
Local RES
Fuentebella said the second draft circular is meant to allow a local RES, or an affiliate of a distribution utility that functions as an RES, to continue serving the captive market under a separate entity.
“DUs may provide electricity services to contestable customers within its franchise area as a local RES, upon authorization from the ERC; provided that the DU shall comply with the unbundling provisions of Republic Act 9136 and Rule 10 of the rules and regulations to implement RA 9136,” stated the draft circular “Providing Policies on the Implementation of RCOA for RES in the Philippines Electric Power Industry.”
RES are the entities licensed by the ERC to supply electricity to end-users in contestable market.
The following entities may be considered to become RES:
- Generation company or affiliate thereof;
- An affiliate of a distribution utility;
- Retail aggregators;
- An IPP administrator; and
- Any prospective generation company whose power project is undergoing construction.
To serve the contestable customers, these entities shall secure a license from the ERC.
The draft circular explicitly states that a licensed RES engaged in the generation and distribution sectors of the power industry shall unbundle its supply business.
Legal opinion
To make sure that the DOE is on the right track, the agency will seek legal advice from the Office of the Solicitor General (OSG).
Energy Secretary Alfonso G. Cusi had said that a legal opinion would bolster the agency’s agenda in implementing RCOA. “We need the backing of legal experts. Will we not violate any law or ruling if we are to continue to lower the threshold via a voluntary basis?” Cusi asked.
Senate Committee on Energy Chairman Sherwin T. Gatchalian is also seeking a legal opinion from the Joint Congressional Power Commission (JCPC).
“We are pushing for JCPC to come up with legal opinion on RCOA, which can be used to establish the legality of RCOA during hearings at the Supreme Court,” Gatchalian said.
He noted that a legal opinion would “give a lot of weight to the arguments raised on RCOA”.
The petition for a TRO was sought by the Philippine Chamber of Commerce and Industry, San Beda College Alabang Inc., Ateneo de Manila University (AdMU), and Riverbanks Development Corp. They pointed out that RA 9136, or the Electric Power Industry Reform Act of 2001 (Epira), does not call for a mandatory switch for customers to purchase their electricity from a DU to an RES.
“AdMU believes that our government and regulating bodies should ultimately seek to protect our basic, constitutional right to freedom of choice. And this right should extend to all electricity consumers. If we are allowed to choose the best supplier for our needs in a market that is allowed to work freely and for the common good, then such a scenario will be most beneficial to all consumers concerned, especially those smaller scale contestable customers like schools and universities that may have a difficult time searching for a new contract,” AdMU President Fr. Jose Ramon Villarin said.
“From the consumer standpoint, it’s a very negative position. The power sector was privatized thinking in the end that consumers would have the power of choice. But this didn’t happen because it was stalled. And because of this, only the power generators benefited from it,” Gatchalian added.
He said the Senate would initiate the move by recommending the issuance of a legal opinion. “The Senate will trigger it. Now, we will give a memo to JCPC to study it, and if it finds merit, then that will be an official resolution from JCPC.”
Epira incomplete without RCOA
The DOE stressed the need to provide guidance to affected entities and continue the implementation of the key reforms of the Epira pending the resolution of the SC.
“Epira is incomplete without RCOA. We can’t say Epira will be a failure if RCOA is not implemented, but rather it will just be incomplete,” Fuentebella pointed out.
Since Epira was enacted into law 16 years ago, the power industry’s generation, distribution and transmission sectors were already unbundled; monopoly no longer exists.
“We have unbundled the major sectors. Now, we are at the stage of unbundling further what had been unbundled. RCOA is among the last stages of Epira for the law to be fully implemented,” Fuentebella noted.
The DOE chief pointed out that consumers’ power of choice could only be maximized when there is a level playing field for all suppliers. “In the end, whatever will be the final decision, we are hoping that it will redound to the ultimate benefit of the consumers, which is really the intent and the spirit of RCOA.”
The ERC said the TRO would unduly burden consumers.
Lawyer Rexie Digal, ERC spokesman, explained in a text message that RCOA affords the end-users the ability to choose their supplier of electricity, including the ability to negotiate for the rate that would be charged to them.
The scheme, she said, starts with large customers, but is expected to reach the household at some point.
“Delay in the implementation would deprive the ordinary consumers from enjoying the fruits of competition sooner. The end-users would remain as captive to their DUs for a long period of time,” she explained.
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